Date: 20010924
Docket: 2001-1203-IT-I
BETWEEN:
DARRELL B. HOLLANDS
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for
Judgment
Teskey, J.
[1]
The Appellant appeals his assessments of income tax under the
Income Tax Act (the "Act") for the
1998 and 1999. In his Notice of Appeal, he elected the informal
procedure.
Issue
[2]
The sole issue before the Court is whether the Appellant is
entitled to deduct, in the years 1998 and 1999, child support
payments.
Facts
[3]
The facts in this case are not in dispute and are as follows:
(a)
The Appellant and Margaret Shawn Tamara Meyer
lived together in a conjugal relationship from July 1985 until
February 1986.
(b)
In June of 1986 a Summons was issued to the Appellant in the
Court of Queen's Bench of Alberta claiming an affiliation and
maintenance order.
(c)
The Appellant contacted Ione Iverson, a worker at the Child
Maintenance Services. As a result of that, support for the infant
was agreed upon and a Paternity Agreement was entered into on the
28th of August, 1986 and was filed with the Court of Queen's
Bench of Alberta.
(d)
On the 14th of November, 1995, the mother of the child wrote to
the Appellant requesting more funds, and on the 30th of that
month in that year the two agreed in writing to an additional
$280 per month, for a total of $400 per month for support of this
child.
[4]
In computing income for the 1998 and 1999 taxation years, the
Appellant claimed a deduction for child support in the amount of
$4,800 for 1998 and $1,440 for 1999.
[5]
The Minister of National Revenue (the "Minister")
disallowed the deductions when assessing the Appellant.
Respondent's Position
[6]
The right to deduct child support is derived from
paragraph 60(b) of the Act. It reads:
60
There may be deducted in computing a taxpayer's income for a
taxation year such of the following amounts as are
applicable:
...
(b)
support — the total of all amounts each of which is an
amount determined by the formula
A - (B + C)
where
A
is the total of all amounts each of which is a support amount
paid after 1996 and before the end of the year by the taxpayer to
a particular person, where the taxpayer and the particular person
were living separate and apart at the time the amount was
paid,
B
is the total of all amounts each of which is a child support
amount that became payable by the taxpayer to the particular
person under an agreement or order on or after its commencement
day and before the end of the year in respect of a period that
began on or after its commencement day, and
C
is the total of all amounts each of which is a support amount
paid by the taxpayer to the particular person after 1996 and
deductible in computing the taxpayer's income for a preceding
taxation year;
[7]
By subsection 60.1(4), the definitions in
subsection 56.1(4) apply to section 60.
Subsection 56.1(4) refers to the deductibility of
"support amount". Support amount is defined as
follows:
"support amount" means an amount payable or
receivable as an allowance on a periodic basis for the
maintenance of the recipient, children of the recipient or both
the recipient and children of the recipient, if the recipient has
discretion as to the use of the amount, and
(a)
the
recipient is the spouse or former spouse of the payer, the
recipient and payer are living separate and apart because of the
breakdown of their marriage and the amount is receivable under an
order of a competent tribunal or under a written agreement;
or
(b)
the payer
is a natural parent of a child of the recipient and the amount is
receivable under an order made by a competent tribunal in
accordance with the laws of a province.
[8]
Counsel for the Respondent argues that the child support payments
made were not deductible by the Appellant for the taxation years
1998 and 1999 as the payments were not "support
amounts" as defined under paragraph 56.1(4)(b)
and thus not deductible under paragraph 60(b). The
Respondent submits that the Appellant is not entitled to the
deductions because the support payments were not payable under an
order made by a competent tribunal, in accordance with the laws
of the province as required by paragraph 56.1(4)(b).
The Respondent also submits that the deductions are not permitted
under paragraph 56.1(4)(a) as the Appellant and
Margaret Shawn Tamara Meyer
("Ms. Meyer") are not former spouses for the
purposes of the Act.
Analysis
[9]
The agreement entered into by the Appellant and Ms. Meyer
was an agreement entered into under section 10 of the
Maintenance and Recovery Act of Alberta ("Recovery
Act") (Revised Statutes of Alberta, 1980, Chap. M-2).
Subsection 10(1) of the Recovery Act reads:
10(1) A putative father
may enter into an agreement
a)
with the Director, or
b)
with the Director and the mother,
whereby he undertakes to pay the whole or any part of all or
any of the expenses referred to in section 21, if the amounts to
be paid are acceptable to the Director and if the agreement
contains the putative father's admission that he caused or
possibly caused the pregnancy of the mother.
[10] The 1986
agreement was entered into by the Appellant ("putative
father"), Ms. Meyer (the "mother") and the
Director under the authority of section 4 of the
Maintenance Enforcement Act (the "Enforcement
Act") (Statutes of Alberta, 1985,
Chap. M-0.5) and was filed with the Court of
Queen's Bench of Alberta.
[11]
Subsection 1(2) of the Enforcement Act reads:
An agreement entered into under section 10 or 51 of the
Maintenance and Recovery Act is deemed to be a maintenance
order under this Act.
Paragraph 1(1)(e) that Act reads:
"maintenance order" means an order or interim order
of a court in Alberta or an order, other than a provisional order
that has not been confirmed, registered under the Reciprocal
Enforcement of Maintenance Orders Act that has a provision
requiring the payment of maintenance.
Subsection 12(1) of that Act reads:
The Director or a creditor may file with the Court of
Queen's Bench a maintenance order that is not otherwise filed
with the Court and, on being filed, the parts of the maintenance
order that relate to maintenance are deemed to be a judgment of
the Court of Queen's Bench.
[12] The
Respondent directed the Court to the decision of Fantini v.
The Queen [1998] 2 C.T.C. 2256. The facts in that case
are almost identical to the case at hand. In that case my
colleague Bowman J. (as he then was) decided that the
Alberta statute, which deemed a maintenance agreement to be an
order by a court did not make it a court order for the purposes
of the Income Tax Act. Bowman J. in his reasons for
judgment stated:
... Here we have the Minister of National Revenue seeking to
transpose a provincial statutory fiction into a federal statute.
That cannot be done. Of course Parliament could by appropriate
language in a federal statute adopt, for the purposes of that
statute, a provincial statutory fiction. That is not however what
happened here. ...
[13] I
respectfully disagree with this position. By using the phrase
"an order made by a competent tribunal in accordance with
the laws of a province" in paragraph 56.1(4)(b)
of the Act, Parliament has decided to transpose the laws
of a province concerning orders into a federal statute. If the
laws of a province operate to create a statutory fiction then it
is not for the Minister to decide otherwise. The agreement
therefore is a court order.
[14] In the
case of Hillis v. The Queen, 83 DTC 5365, Pratte J.
of the Federal Court of Appeal determined that a deeming
provision of a Saskatchewan statute could have that artificial
meaning apply for the purposes of the Act. In the case of
Dale v. The Queen, 97 DTC 5252, Robertson J. for the
Federal Court of Appeal stated at page 5256:
... If the legislature of a province authorizes its courts to
deem something to have occurred on a date already past, then it
is not for the Minister to undermine the legislation by refusing
to recognize the clear effect of the deemed event. ...
[15] I find
that the Paternity Agreement of 1986 requiring the Appellant to
pay child support in the amount of $120 per month is a court
order for the purposes of paragraph 56.1(4)(b) of the
Act. Paragraph 56.1(4)(b) provides that, for a
payment to be considered a support amount, the payment must be
receivable under an order made by a competent tribunal, in
accordance with the laws of a province. Subsection 12(1) of
the Enforcement Act deems the Paternity Agreement to be an
order made by the court. The laws of the province of Alberta
dictate that the agreement is to be deemed an order made by the
court.
[16]
Accordingly, I find that the child support payments of $120 per
month made by the Appellant to Ms. Meyer in the 1998 and
1999 taxation years were paid pursuant to an order made by a
competent tribunal, in accordance with the laws of a province, as
required by paragraph 56.1(4)(b), and is therefore
deductible by the Appellant.
[17] The
Respondent also argued that the child support payments were not
deductible, as the payments were not made to a former spouse.
Under paragraph 56.1(4)(a), the payments of $120 per
month were also made pursuant to a written agreement and the $280
per month support payments were also made pursuant to the
amending written agreement of 1995 are not deductible because
Ms. Meyer is not a "former spouse".
[18] The
definition of "spouse" is found in
subsection 252(4) of the Act as it read in 1998 and
1999. The subsection reads as follows:
In this Act,
(a)
words referring to a spouse at any time of a
taxpayer include the person of the opposite sex who cohabits at
that time with the taxpayer in a conjugal relationship and
(i)
has so cohabited with the taxpayer throughout a 12-month
period ending before that time, or
(ii)
would be a parent of a child of whom the taxpayer would be a
parent, if this Act were read without reference to paragraph
(1)(e) and subparagraph (2)(a)(iii)
and, for the purposes of this paragraph, where at any time the
taxpayer and the person cohabit in a conjugal relationship, they
shall, at any particular time after that time, be deemed to be
cohabiting in a conjugal relationship unless they were not
cohabiting at the particular time for a period of at least 90
days that includes the particular time because of a breakdown of
their conjugal relationship;
(b)
references to marriage shall be read as if a conjugal
relationship between 2 individuals who are, because of paragraph
(a), spouses of each other were a marriage;
(c)
provisions that apply to a person who is married apply to a
person who is, because of paragraph (a), a spouse of a
taxpayer; and
(d)
provisions that apply to a person who is unmarried do not apply
to a person who is, because of paragraph (a), a spouse of
a taxpayer.
[emphasis added]
[19] This
subsection was added in 1994 applicable after 1992. Under the
transitional rule, this expanded meaning of "spouse" is
to be read as being a part of the Act effective January 1,
1993. Since the Act is being read in this case in respect
of payments made in the 1998 and 1999 taxation years, the
expanded definition of "spouse" applies. In Scott v.
Canada, [2001] T.C.J. No. 437 (Q.L.), a case with very
similar facts. My colleague Hershfield J. stated at
paragraph 7:
... The expanded definition does not put a limit on how far to
look back. To the contrary, it stipulates, in effect "any
time" as the available look back time. The expanded
definition applies at "any time" the relationship needs
to be examined including relationships that started, or started
and ended, prior to 1993 ... If Parliament had intended that
common law relationships before 1993 could not be recognized, the
cohabitation period referred to in subsection 252(4) could
similarly have referenced relevant dates as to when the
cohabitation had to commence or end. The effective date alone
being 1993, does not do that in my view, at least in this case
where the express language of the amended provision invites a
construction that permits (dictates) examining a relationship
"at any time" which, as stated, clearly includes a time
before the effective date of the amendment. ...
[20] I agree
with the above analysis of the timing of the applicability of
subsection 252(4). Section 140(4) of the Income Tax
Amendments Revision Act (Schedule VIII, 1994, c. 7)
introducing this amendment did not state that the conjugal
relationship referred to in subsection 252(4) must have
existed after 1992. The section simply states that
subsection 252(4) is to apply after 1992.
[21] The
definition of "spouse" in
subparagraph 252(4)(a)(ii) places the Appellant and
Ms. Meyer as former spouses and therefore qualify as such
for the purpose of determining "support amounts".
Ms. Meyer is a person of the opposite sex who had cohabited
with the Appellant, she and he being the parents of the child.
Pursuant to paragraph 56.1(4)(a), the $400 in child
support paid per month pursuant to the written agreement entered
into on August 28, 1986 and amended on November 30,
1995 are deductible by the Appellant, as the payments were
receivable by a former spouse (as defined by
subparagraph 252(4)(a)(ii)) under a written agreement
entered into in 1986 and amended in writing in 1995.
[22] For these
reasons the appeals are allowed, with costs, and the assessments
are referred back to the Minister for reconsideration and
reassessment on the basis that the Appellant is entitled to
deduct from income the amounts of $4,800 and $1,440, in 1998 and
1999 respectively, paid as support to Margaret Shawn Tamara Meyer
for the benefit of their child Christopher Brad Meyer born on
November 4, 1984.
Signed at Ottawa, Canada, this 24th day of September, 2001
"Gordon Teskey"
J.T.C.C.
COURT FILE
NO.:
2001-1203(IT)I
STYLE OF
CAUSE:
Darrell B. Hollands and The Queen
PLACE OF
HEARING:
Edmonton, Alberta
DATE OF
HEARING:
August 22, 2001
REASONS FOR JUDGMENT BY: The
Honourable Judge Gordon Teskey
DATE OF
JUDGMENT:
September 24, 2001
APPEARANCES:
Agent for the
Appellant:
Karen Hollands
Counsel for the
Respondent:
Mark Heseltine
COUNSEL OF RECORD:
For the
Appellant:
Name:
Firm:
For the
Respondent:
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2001-1203(IT)I
BETWEEN:
DARRELL B. HOLLANDS
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeals heard on August 22, 2001 at
Edmonton, Alberta, by
the Honourable Judge Gordon Teskey
Appearances
Agent for the
Appellant:
Karen Hollands
Counsel for the
Respondent:
Mark Heseltine
JUDGMENT
The appeals from the assessments made under the Income Tax
Act for the 1998 and 1999 taxation years are allowed, with
costs, and the assessments are referred back to the Minister for
reconsideration and reassessment, in accordance with the attached
Reasons for Judgment.
Signed at Ottawa, Canada, this 24th day of September 2001.
J.T.C.C.
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